Due lump sums over next 5 years - how to fund house move sooner

JJPA

Apologies if that thread title is a little confusing, I'll try to explain a little more.

Basically, my wife and I own our home currently with approx 50% equity. Only problem is, we have two young children and we're starting to outgrow it, whilst the schools in the immediate vecinity aren't great with our eldest due to start school in September-18.

Fortunately, I am due some money to be paid in (somewhat irregular) instalments over the next five years which would enable us to buy the kind of long-term property we want, in the right area, mortgage-free.

That though, would mean waiting five years which I don't particularly want to do.

By the beginning of next year, we will have half the total sum which would act as a very nice deposit. I did however want to keep our existing property and let it out (on a buy-to-let / let-to-buy mortgage). Here's what I'd thought of doing:

- Use the lump sum we'll have as a deposit for a new house
- Remortgage our existing place as a buy-to-let
- Reduce the cost of the mortgage on the new place by opting for an interest-only option
- Pay large chunks off the mortgage on the new place with each additional instalment due, until we're able to pay it off completely in approx 5 years time

Now, I know in the vast majority of cases that interest-only mortgages are ill-advised and asking for trouble. However, does it make sense in the context of our medium-term situation or is there a better, more sensible alternative?

Hope all makes sense - thoughts appreciated.

Thanks.

glosoli

Interest only on a residential basis (other than for a few, mostly high net worth, high mortgage balance individuals) is mostly a thing of the past now, and the repayment strategy of paying lump sums into the mortgage is unlikely to meet criteria even if it was an option. What are the actual figures your dealing with?

getmore4less

IF you qualify for first direct offset that may be an option.

Wobblydeb

I actually think interest only mortgages have their place, and it would certainly be one route you could take. You could also simply take a 5 year fixed rate deal with a 30 yr term (if that makes it affordable) on the new property. Save the additional sums as you are paid them, and then pay off the new mortgage at the end of the 5 years.

One thing to consider - application deadline for primary school places is 15 January, so you will need to be in the new house by then. Or perhaps consider renting somewhere in the location you want to be in as you won't have received the money for the deposit by then?